Assessing Japan’s renewable energy situation: Can the Feed-In Tariff policy and the Energy grid situation constrain the future of renewable energy in Japan?

Abstract: This thesis uses the principal-agent theory to analyse two interconnected problems within the Japan’s renewable energy sector, namely the Feed-in Tariff (FIT) policy, and the energy grid issue. Following the Fukushima accident, while the nuclear power plants remained closed, Japan’s renewable energy sector was able to experience enormous growth. The number of applicants for the FIT was greater than expected and the current cost of this policy has been higher than the original estimates. This financial burden will continue to grow, should this policy remain intact or if no other policy will take place. Another issue that the current renewable energy faces in Japan is regarding the newcomers being denied the access to the energy grid, as it would endanger the stability of already divided energy grid. This energy grid issue, as well as the increasing costs of the FIT policy, both have a potential to eventually lead to the stagnation of Japan’s renewable growth. Is this the breaking point for the future of renewable energy in Japan? Will the FIT policy become too expensive to maintain? Will the energy grid issue not allow further growth of renewable energy in Japan? These problems, if left unanswered, can have significant consequences for the future of Japan’s renewable energy sector and therefore it is important to analyse, if they are getting the attention they require. Therefore, for Japan to further expand its renewable energy capacity, there is a need to tackle these issues; the current FIT policy, as well as the energy grid issue, since they are related, and either can have massive consequences for the future of renewable energy in Japan. By looking at this topic from the principal-agent theoretical framework, this thesis will analyse and give a better understanding regarding the issues that Japan’s renewable sector has to deal with, should the proportion of renewables continue to grow. This thesis follows the structure of giving an overall overview of the topic, supplemented with the analysis of the existing literature review, using the systematic review and then specifically dealing with both FIT policy, as well as energy grid. The analysis conducted in this thesis, together with the principal-agent theoretical framework can provide us with a better insight over the complexity of the issues within Japan’s renewable energy sector and provide us with a better understanding regarding the political, as well as economic struggles within the Japan’s renewable sector.